The second Finance Bill for 2017 is due to be published tomorrow: 8 September. We expect it to contain provisions to radically change the way corporation tax losses can be relieved when they are carried forward.
Currently, carried forward losses can generally only be used against the same type of profits, eg. trading losses against profits of the same trade. The new rules will apply to losses that arise on and after 1 April 2017. These corporate losses will be available to be group relieved, or set against the company’s own total profits arising in later years, i.e. not just against profits of the same trade. Also, the loss-making company will be able to decide how much of the loss is relieved and how much is carried forward to a future year.
Where the company’s accounting period straddles 1 April 2017, the profits and losses should be time-apportioned into two nominal accounting periods; up to 31 March 2017 and from 1 April 2017, unless another basis of apportioning the losses can be shown to be just and reasonable.
There will be an annual £5 million cap on losses which can be relieved against total profits. In addition, 50% of losses in excess of £5 million can relieved in this new flexible way. The balance of excess losses over £5 million will be relieved as now, restricting the set-off to the same source. It will thus be important to understand both the old and new losses rules.
This new flexibility for losses won’t be available where any of the following apply:
- the company is a trading charity;
- the trade activities have become small or negligible;
- the trade is not carried on, on a commercial basis; or
- the trade is carried on wholly abroad.
Companies with an accounting period ending on 31 December need to pay their corporation tax for 2016 by 1 October 2017. HMRC has made that task more difficult this year by ceasing its practice of issuing a reminder containing a CT payslip to those companies. HMRC has also refused to make a blank payslip available either on gov.uk or through commercial software.
If the company requires a payslip to pay their tax they should look for the most recent CT603 Notice to file form, and use the blank payslip attached to it. Any older payslips will contain incorrect bank and accounting period details.
The method preferred by HMRC is for taxpayers to pay all tax liabilities electronically, following the guidance on gov.uk.